20s & 30s Best Practices: Investing Process

You don’t have to be an expert to invest successfully, but you do need to understand and feel comfortable with the basics, starting with your asset allocation. Asset allocation is what you are investing in (stocks and bonds). Your asset allocation will change as you get closer to retirement and as your risk tolerance changes. Over time, and changes in the market, the performance of your funds can cause the asset allocation to look different from your original plan. Rebalancing is simply adjusting the allocations of the funds in your account back to their original targets or changing the allocations as your financial goals change. This is essential to maximize returns and minimize risks. As a result of your efforts you will have a better understanding of your 401(k) investments and allocation.

Invest in the market. Stocks average 10.8% gains/yr compared to 4% for bonds.